My Indian company paid DDT at over twenty per cent on dividend to its UK parent. Can I restrict it to the ten per cent treaty rate, and does the Special Bench decision stop me?
A Division Bench of the Bombay High Court at Goa held that it can. It allowed the appeal, set aside the Board for Advance Rulings' ruling of 27 June 2024, and declared that Colorcon Asia Pvt. Ltd. is entitled to restrict the tax rate on dividends distributed by it to Colorcon Ltd, United Kingdom, at ten per cent under Article 11 of the India-UK tax treaty — on the reasoning that DDT paid by a distributing company is not an income tax on the profits or income of the company but a tax on the dividend, which is the income of the shareholder, charged in the company's hands only for administrative convenience, so that s.90(2) lets the lower treaty rate be applied.
Decided by the High Court (Bharati Dangre J and Nivedita P. Mehta J (High Court of Bombay at Goa); judgment per Bharati Dangre J) on 2025-11-28, reported as Tax Appeal No. 5 of 2024; neutral citation 2025:BHC-GOA:2418-DB; reserved 13 August 2025, pronounced 28 November 2025; cited in later orders as (2025) 181 taxmann.com 301 (Bom.) and 2025 SCC OnLine Bom 5983. It bears on section 115-O, section 90, section 90(2), section 2(43), section 4, section 245Q, section 245W, section 2(22) of the Income Tax Act 1961, in How Tax Law Is Read and Refunds, Interest & Condonation matters.
This is the earliest High Court decision on the question that could be found, and it goes against the Special Bench — but no exhaustive search for an earlier one was possible, so do not plead it as the first. Until 28 November 2025 an Assessing Officer could simply cite the Mumbai Special Bench in Total Oil India Pvt. Ltd.; after it, a taxpayer in Maharashtra or Goa has a Division Bench of his own High Court the other way, and Tribunals elsewhere have followed it (the Delhi Tribunal did so in Mitsui Kinzoku Components India Pvt. Ltd. on 31 December 2025, directing the ten per cent India-Japan rate). But it is not the end, and two things have happened since that change how it must be used. On 27 April 2026 a coordinate Division Bench of the same High Court, in Foseco India Ltd., doubted this decision and referred to a Larger Bench both whether it lays down the correct position and whether, in the light of the Supreme Court in Godrej & Boyce, it is per incuriam. And the Revenue's petition against this judgment is now pending in the Supreme Court — JCIT, Panji & Ors. v. M/s. Colorcon Asia Pvt. Ltd., S.L.P. (C) No. 7546 of 2026 — where on 13 May 2026 the Court framed three questions going to the nature of the s.115-O levy, allowed four intervention applications, directed its order to be circulated to every High Court for publication in the cause list, and said that "the High Courts may consider staying the further proceedings of any matter involving similar issues"; the petition stands listed for final hearing on 29 September 2026. Leave has not been granted and this judgment has not been stayed, so it remains a decision of the Bombay High Court that binds authorities in Maharashtra and Goa. But do not tell a client the point is won. Put the reference and the Supreme Court petition on the record yourself, and expect proceedings to be held rather than decided — which is what the Tribunals have been doing. Two limits on the decision are worth knowing before you over-plead it. The Kolkata Tribunal in Bata India Ltd. (8 June 2026) observed that before the Bombay High Court in Colorcon the issue of the PROTOCOL to the treaty was not considered, nor the impact of the Supreme Court's decision in Nestle SA — because what was argued was a ten per cent rate and not a lower five per cent rate — so a taxpayer arguing a protocol or most-favoured-nation rate below the Article rate is not covered by Colorcon and must deal with Nestle SA separately. And the reasoning depends on the particular treaty article: what was applied was Article 11 of the India-UK convention, and any treaty whose own terms exclude DDT from the taxes covered has to be argued on its own words.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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Colorcon Asia Pvt. Ltd., a private limited company incorporated under the Companies Act, 1956 and a wholly owned subsidiary of Colorcon Limited, United Kingdom, is engaged in manufacturing, supply and technical support of formulated film, coating systems, modified release technologies and functional excipients for the pharmaceutical industry. Having made cumulative dividend pay-outs in excess of one hundred crore rupees, it applied on 20 May 2019 under s.245Q for an advance ruling on whether the dividend distribution tax it paid under s.115-O was to be governed by the India-United Kingdom Double Taxation Avoidance Agreement or dealt with under s.115-O. The Board for Advance Rulings-I, New Delhi ruled against it on 27 June 2024, relying on the Mumbai Special Bench decision in DCIT v. Total Oil India Pvt. Ltd. to hold that DDT fell outside the scope of the treaty. The company appealed to the High Court under s.245W. The Department resisted, contending that DDT was explicitly excluded from the taxes covered by the treaty in question and that DDT is a tax on the company and not on the shareholder, so that the assessee could not claim a benefit available to residents of the treaty partner. Mr Porus Kaka, Senior Advocate, appeared for the appellant and Ms Amira Razaq for the Department.
The appeal was allowed. The ruling of the Board for Advance Rulings dated 27 June 2024 was set aside, and it was declared that on the facts and circumstances and in law the company is entitled to restrict the tax rate on dividends distributed by it to Colorcon Ltd, United Kingdom, at ten per cent under Article 11 of the India-UK tax treaty.
At its paragraph 26 the Court held that the amendment to s.115-O makes it clear that DDT is not a tax on the income of the dividend-declaring company but is ultimately a tax on the dividend income of shareholders. At its paragraph 55, on the passages of this judgment reproduced by the Delhi Tribunal in Mitsui Kinzoku Components India Pvt. Ltd., it found itself fortified by the Delhi Tribunal's observation in Giesecke & Devrient that, on the legislative history of s.115-O, DDT is a levy on the dividend distributed by the payer company which, being an additional tax, is covered by "tax" as defined in s.2(43) and is therefore chargeable under s.4, which is itself subject to the other provisions of the Act including s.90 and sub-section (2) of it, so that in a case of avoidance of double taxation the provision more beneficial to the assessee must be preferred. At its paragraph 56 it read the Supreme Court's decision in Tata Tea Company, given on the constitutional validity of s.115-O, as holding that the source of the income may be agriculture but that when a dividend is declared to be distributed and paid to a shareholder its source is not relevant, as it remains dividend income. At its paragraph 58 it held that, in view of the statutory provisions and the legislative background of s.115-O, DDT paid by a company distributing dividend is not an income tax on the profits or income of the company but is a tax on the dividend, which is the income of the shareholder, charged in the hands of and recovered from the distributing company merely for administrative convenience, and that in pith and substance it is a tax on dividends that is income of the shareholders. At its paragraph 59 it held that the Board for Advance Rulings had grossly erred in rejecting that distinction and had failed to consider the binding dictum of the Supreme Court in Tata Tea, and that its reliance on Godrej and Boyce — a decision rendered on whether expenditure incurred in relation to earning exempt dividend income was disallowable under s.14A — was misplaced. At its paragraph 60 it held that s.90(2) allows the appellant to apply the lower rate under the treaty, that Article 11(2) restricts the rate of tax on such dividend income to ten per cent, and that there is no embargo in Article 11 on the appellant applying that lower rate. At its paragraph 61 it held that the Authority had erred in not appreciating that DDT collected in excess of the ten per cent provided by the India-UK treaty is erroneous and contrary to law and that retention of the excess would be contrary to Article 265 of the Constitution of India.
As a result of the above, the Appeal is allowed by setting aside the Ruling dated 27/06/2024 passed by the Board For Advanced Rulings, New Delhi, by declaring that, on the facts and circumstances of the case and in law, Colorcon Asia Pvt. Ltd ("Colorcon India" or "the Applicant" or "Company") is entitled to restrict the tax rate on dividends distributed by it to Colorcon Ltd, United Kingdom (UK), at 10% under Article 11 of the India - UK Tax Treaty.
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Handle my notice → Ask a CA on WhatsAppA Division Bench of the Bombay High Court at Goa held that it can. It allowed the appeal, set aside the Board for Advance Rulings' ruling of 27 June 2024, and declared that Colorcon Asia Pvt. Ltd. is entitled to restrict the tax rate on dividends distributed by it to Colorcon Ltd, United Kingdom, at ten per cent under Article 11 of the India-UK tax treaty — on the reasoning that DDT paid by a distributing company is not an income tax on the profits or income of the company but a tax on the dividend, which is the income of the shareholder, charged in the company's hands only for administrative convenience, so that s.90(2) lets the lower treaty rate be applied. This was decided by the High Court (Bharati Dangre J and Nivedita P. Mehta J (High Court of Bombay at Goa); judgment per Bharati Dangre J) and bears on section 115-O, section 90, section 90(2), section 2(43), section 4, section 245Q, section 245W, section 2(22) of the Income Tax Act 1961. It is reported as Tax Appeal No. 5 of 2024; neutral citation 2025:BHC-GOA:2418-DB; reserved 13 August 2025, pronounced 28 November 2025; cited in later orders as (2025) 181 taxmann.com 301 (Bom.) and 2025 SCC OnLine Bom 5983. This is the earliest High Court decision on the question that could be found, and it goes against the Special Bench — but no exhaustive search for an earlier one was possible, so do not plead it as the first. Until 28 November 2025 an Assessing Officer could simply cite the Mumbai Special Bench in Total Oil India Pvt. Ltd.; after it, a taxpayer in Maharashtra or Goa has a Division Bench of his own High Court the other way, and Tribunals elsewhere have followed it (the Delhi Tribunal did so in Mitsui Kinzoku Components India Pvt. Ltd. on 31 December 2025, directing the ten per cent India-Japan rate). But it is not the end, and two things have happened since that change how it must be used. On 27 April 2026 a coordinate Division Bench of the same High Court, in Foseco India Ltd., doubted this decision and referred to a Larger Bench both whether it lays down the correct position and whether, in the light of the Supreme Court in Godrej & Boyce, it is per incuriam. And the Revenue's petition against this judgment is now pending in the Supreme Court — JCIT, Panji & Ors. v. M/s. Colorcon Asia Pvt. Ltd., S.L.P. (C) No. 7546 of 2026 — where on 13 May 2026 the Court framed three questions going to the nature of the s.115-O levy, allowed four intervention applications, directed its order to be circulated to every High Court for publication in the cause list, and said that "the High Courts may consider staying the further proceedings of any matter involving similar issues"; the petition stands listed for final hearing on 29 September 2026. Leave has not been granted and this judgment has not been stayed, so it remains a decision of the Bombay High Court that binds authorities in Maharashtra and Goa. But do not tell a client the point is won. Put the reference and the Supreme Court petition on the record yourself, and expect proceedings to be held rather than decided — which is what the Tribunals have been doing. Two limits on the decision are worth knowing before you over-plead it. The Kolkata Tribunal in Bata India Ltd. (8 June 2026) observed that before the Bombay High Court in Colorcon the issue of the PROTOCOL to the treaty was not considered, nor the impact of the Supreme Court's decision in Nestle SA — because what was argued was a ten per cent rate and not a lower five per cent rate — so a taxpayer arguing a protocol or most-favoured-nation rate below the Article rate is not covered by Colorcon and must deal with Nestle SA separately. And the reasoning depends on the particular treaty article: what was applied was Article 11 of the India-UK convention, and any treaty whose own terms exclude DDT from the taxes covered has to be argued on its own words. If it applies to you, the first step is this: Identify the treaty article that caps the dividend rate and whether the non-resident shareholder is its beneficial owner; Colorcon turned on Article 11 of the India-UK convention and the equivalent article differs treaty by treaty.
Colorcon Asia Pvt. Ltd., a private limited company incorporated under the Companies Act, 1956 and a wholly owned subsidiary of Colorcon Limited, United Kingdom, is engaged in manufacturing, supply and technical support of formulated film, coating systems, modified release technologies and functional excipients for the pharmaceutical industry. Having made cumulative dividend pay-outs in excess of one hundred crore rupees, it applied on 20 May 2019 under s.245Q for an advance ruling on whether the dividend distribution tax it paid under s.115-O was to be governed by the India-United Kingdom Double Taxation Avoidance Agreement or dealt with under s.115-O. The Board for Advance Rulings-I, New Delhi ruled against it on 27 June 2024, relying on the Mumbai Special Bench decision in DCIT v. Total Oil India Pvt. Ltd. to hold that DDT fell outside the scope of the treaty. The company appealed to the High Court under s.245W. The Department resisted, contending that DDT was explicitly excluded from the taxes covered by the treaty in question and that DDT is a tax on the company and not on the shareholder, so that the assessee could not claim a benefit available to residents of the treaty partner. Mr Porus Kaka, Senior Advocate, appeared for the appellant and Ms Amira Razaq for the Department. The matter was decided on 2025-11-28 by the High Court (Bharati Dangre J and Nivedita P. Mehta J (High Court of Bombay at Goa); judgment per Bharati Dangre J). On those facts the High Court held as follows. The appeal was allowed. The ruling of the Board for Advance Rulings dated 27 June 2024 was set aside, and it was declared that on the facts and circumstances and in law the company is entitled to restrict the tax rate on dividends distributed by it to Colorcon Ltd, United Kingdom, at ten per cent under Article 11 of the India-UK tax treaty.
At its paragraph 26 the Court held that the amendment to s.115-O makes it clear that DDT is not a tax on the income of the dividend-declaring company but is ultimately a tax on the dividend income of shareholders. At its paragraph 55, on the passages of this judgment reproduced by the Delhi Tribunal in Mitsui Kinzoku Components India Pvt. Ltd., it found itself fortified by the Delhi Tribunal's observation in Giesecke & Devrient that, on the legislative history of s.115-O, DDT is a levy on the dividend distributed by the payer company which, being an additional tax, is covered by "tax" as defined in s.2(43) and is therefore chargeable under s.4, which is itself subject to the other provisions of the Act including s.90 and sub-section (2) of it, so that in a case of avoidance of double taxation the provision more beneficial to the assessee must be preferred. At its paragraph 56 it read the Supreme Court's decision in Tata Tea Company, given on the constitutional validity of s.115-O, as holding that the source of the income may be agriculture but that when a dividend is declared to be distributed and paid to a shareholder its source is not relevant, as it remains dividend income. At its paragraph 58 it held that, in view of the statutory provisions and the legislative background of s.115-O, DDT paid by a company distributing dividend is not an income tax on the profits or income of the company but is a tax on the dividend, which is the income of the shareholder, charged in the hands of and recovered from the distributing company merely for administrative convenience, and that in pith and substance it is a tax on dividends that is income of the shareholders. At its paragraph 59 it held that the Board for Advance Rulings had grossly erred in rejecting that distinction and had failed to consider the binding dictum of the Supreme Court in Tata Tea, and that its reliance on Godrej and Boyce — a decision rendered on whether expenditure incurred in relation to earning exempt dividend income was disallowable under s.14A — was misplaced. At its paragraph 60 it held that s.90(2) allows the appellant to apply the lower rate under the treaty, that Article 11(2) restricts the rate of tax on such dividend income to ten per cent, and that there is no embargo in Article 11 on the appellant applying that lower rate. At its paragraph 61 it held that the Authority had erred in not appreciating that DDT collected in excess of the ten per cent provided by the India-UK treaty is erroneous and contrary to law and that retention of the excess would be contrary to Article 265 of the Constitution of India. In the words reproduced by the source cited on this page: "As a result of the above, the Appeal is allowed by setting aside the Ruling dated 27/06/2024 passed by the Board For Advanced Rulings, New Delhi, by declaring that, on the facts and circumstances of the case and in law, Colorcon Asia Pvt. Ltd ("Colorcon India" or "the Applicant" or "Company") is entitled to restrict the tax rate on dividends distributed by it to Colorcon Ltd, United Kingdom (UK), at 10% under Article 11 of the India - UK Tax Treaty." The decision followed or applied Giesecke & Devrient (India) Pvt. Ltd. v. Addl. CIT, ITA No. 7075/DEL/2017 (ITAT Delhi, 13 October 2020) — reasoning approved; Union of India v. Tata Tea Co. Ltd. — applied on the nature of dividend income; Godrej and Boyce — distinguished; the Board for Advance Rulings' reliance on it held misplaced; DCIT v. Total Oil India Pvt. Ltd. (Special Bench, ITAT Mumbai, 20 April 2023) — not followed.
It was decided by the High Court on 2025-11-28 and is reported as Tax Appeal No. 5 of 2024; neutral citation 2025:BHC-GOA:2418-DB; reserved 13 August 2025, pronounced 28 November 2025; cited in later orders as (2025) 181 taxmann.com 301 (Bom.) and 2025 SCC OnLine Bom 5983. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 115-O, section 90, section 90(2), section 2(43), section 4, section 245Q, section 245W, section 2(22), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed. The ruling of the Board for Advance Rulings dated 27 June 2024 was set aside, and it was declared that on the facts and circumstances and in law the company is entitled to restrict the tax rate on dividends distributed by it to Colorcon Ltd, United Kingdom, at ten per cent under Article 11 of the India-UK tax treaty. It arises in How Tax Law Is Read and Refunds, Interest & Condonation matters, on section 115-O, section 90, section 90(2), section 2(43), section 4, section 245Q, section 245W, section 2(22) of the Income Tax Act 1961, and was decided by Bharati Dangre J and Nivedita P. Mehta J (High Court of Bombay at Goa); judgment per Bharati Dangre J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Check whether the treaty or its protocol excludes dividend distribution tax from the taxes covered — the Department argued exactly that in Colorcon, and a treaty that says so on its face is a different case. Plead s.90(2) squarely: the argument accepted was that DDT is additional income-tax within s.2(43), chargeable under s.4, which is itself subject to the other provisions of the Act including s.90. Put the Foseco India Ltd. reference (Bombay High Court, 27 April 2026) on the record yourself, and say why the officer should still follow Colorcon pending the Larger Bench; concealing it invites a rectification later. Put the Supreme Court petition on the record too — JCIT, Panji & Ors. v. M/s. Colorcon Asia Pvt. Ltd., S.L.P. (C) No. 7546 of 2026, listed for final hearing on 29 September 2026 — and check its current status before you file anything; the Supreme Court has directed its order of 13 May 2026 to be circulated to every High Court and has said the High Courts may consider staying similar proceedings, so an application to keep the matter pending is more likely to succeed than an application to decide it. Do not stretch the decision to a protocol or most-favoured-nation rate below the Article rate — the Kolkata Tribunal in Bata India Ltd. has already noted that the protocol point and Nestle SA were not before the Bombay High Court. If the DDT has been paid, work out the recovery route before the merits: the Delhi Tribunal in Mitsui Kinzoku Components accepted an application under s.237 for refund of the excess, and limitation on that route needs checking on the facts. Where the assessment is still open, consider asking for the issue to be kept alive rather than decided, which is what the Mumbai Tribunal did in Kansai Nerolac Paints Ltd. pending the outcome.
Under appeal, and the appeal has not been decided. The Revenue's petition against this judgment is pending in the Supreme Court and the decision is therefore under appeal, though leave has not been granted and no stay has been made. The Joint Commissioner of Income Tax, Panji & Ors. v. M/s. Colorcon Asia Pvt. Ltd., Petition for Special Leave to Appeal (C) No. 7546 of 2026, arising out of the judgment of 28 November 2025 in Tax Appeal No. 5 of 2024, was listed for admission on 12 March 2026, 5 May 2026, 13 May 2026 and 12 August 2026. By order dated 13 May 2026 (Manoj Misra and Manmohan JJ) the Court recorded that three questions arise — whether tax under s.115-O on an amount declared, distributed or paid by way of dividend is in the nature of tax on distributed profits or tax on dividend; whether DDT paid on dividend to a resident of the United Kingdom can be levied at a rate higher than the treaty permits; and whether DDT, being an income tax or an identical or substantially similar tax, is governed by the UK treaty — noted that a coordinate Bench of the Bombay High Court had doubted this judgment by its order of 27 April 2026 in Income Tax Appeal No. 1123 of 2025 (Foseco India Ltd. Company v. ACIT), reproduced paragraph 40 of that order, allowed four intervention applications, directed the Registry to circulate the order to all High Courts for publication in their cause lists within three weeks, and observed that "the High Courts may consider staying the further proceedings of any matter involving similar issues". On 12 August 2026 (Manoj Misra and Vijay Bishnoi JJ) the petition was, on the parties' joint request, listed for final hearing on 29 September 2026. Separately, the Foseco Division Bench referred to a Larger Bench of the Bombay High Court (i) whether this judgment lays down the correct position in law and (ii) whether, considering the Supreme Court's decision in Godrej & Boyce, it is per incuriam, directing the Registry to place the proceedings before the Chief Justice; those questions were read verbatim on three separate document ids and again in the Supreme Court's own reproduction of them. Tribunals have both followed this judgment (Mitsui Kinzoku Components, ITAT Delhi, 31 December 2025) and declined to apply it pending the outcome (Kansai Nerolac Paints, ITAT Mumbai, 2 June 2026; Bata India Ltd., ITAT Kolkata, 8 June 2026), and the Madras High Court adjourned a similar appeal sine die by reference to the Supreme Court petition (Durr India Private Limited v. ACIT, T.C.A. No. 77 of 2026, 12 June 2026). Checked on 8 September 2026. Whether the Larger Bench has been constituted or has answered was not established, and the outcome of the hearing listed for 29 September 2026 is of course not known. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Retrieval of this judgment was difficult and the reader should know exactly what I saw. The plain page at https://indiankanoon.org/doc/184668723/ transcribed a header and reached paragraph 42; ?type=print reached paragraph 43 and stopped mid-word. The judgment is 69 pages. I therefore obtained the operative disposal through /docfragment/ on the judgment itself, which returned it verbatim, and then obtained it a SECOND time, independently, from the Delhi Tribunal's order in Mitsui Kinzoku Components India Pvt. Ltd. (https://indiankanoon.org/doc/193812344/ and the same document via ?type=print), which reproduces the Bombay High Court's paragraphs 55, 56, 58, 59 and 60 and then the disposal. The two versions of the disposal are word-identical except that the Colorcon page prints 'Article 11 of the India - UK Tax Treaty' with spaces around the hyphen and the Mitsui reproduction prints 'India-UK'; I have used the Colorcon page's own spacing in the key_quote. I did NOT establish how many paragraphs this judgment has, and I have deliberately given the key_quote no paragraph number, because the operative sentence follows paragraph 61 without a number of its own on any route. Paragraphs 56, 58, 59, 60 and 61 were subsequently transcribed at verification from the judgment page itself through targeted /docfragment/ queries and are attributed on that footing; paragraph 55 alone still rests on the Delhi Tribunal's reproduction and is labelled as such in the reasoning. The judgment's paragraph 26 was also read directly. An earlier draft of this entry attributed the Article 265 holding to paragraph 60; on the judgment page it is paragraph 61, and paragraph 60 is the separate s.90(2) and Article 11(2) holding. The judgment's own paragraph 28 and one other passage returned by /docfragment/ read as quotations from earlier authority rather than the Court's own words, so I have not used them. Neutral citation 2025:BHC-GOA:2418-DB was printed on the fragment; the citations (2025) 181 taxmann.com 301 (Bom.) and 2025 SCC OnLine Bom 5983 are reference strings printed inside the later Tribunal and High Court orders I read, not sources I consulted. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed. The ruling of the Board for Advance Rulings dated 27 June 2024 was set aside, and it was declared that on the facts and circumstances and in law the company is entitled to restrict the tax rate on dividends distributed by it to Colorcon Ltd, United Kingdom, at ten per cent under Article 11 of the India-UK tax treaty.
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